Avoid gold scammers

[EJ]

I received this distressing note from a friend of iTulip today. The name of the dealer in question is withheld because we don't have time to get into a pissing contest with them about it. But I can say, after purchasing precious metal coins for more than 40 years that I'm hard pressed to find an industry with a higher preponderance of sleazy, unscrupulous, rip-off artists. I have worked with dozens of dealers over the years and have developed the theory that most of the guys who call–many based outside New York City, for some reason–used to work for various boiler room outfits where they tried to sell crap penny stocks to old ladies, but got fired not because you were too sleazy but because they were too stupid to make their numbers. They were gladly hired by gold dealers.

Case in point:

Eric,

My friend has been ripped off by Scumbag Gold Gallery Ltd. (not the real name).

She lost 35% of her investment made one year ago. Her $100K gold purchase is now only worth $65K, according to Lear. They gave her a summary of her portfolio at her request.

Last year, they convinced her that numismatic coins will increase in value more than bullion gold, and that only cheap skates who don't know any better would buy bullion coins. She is a 60 year old woman, who makes the investment decisions for her family. They told her, "Why buy a Mustang when you can buy a Rolls Royce?" and that numismatics go up three to four times bullion in a gold bull cycle. They called her a "cheap" for not wanting to buy more numismatics.

We need to get the word out. It's not enough to tell people to buy gold. We need to let them know how NOT TO GET SCAMMED from the legions of scumbags who are now in the gold business. They use slimy sales techniques and charge outrageous commissions. Scumbag Gold admitted they charged her 35% commission on the coins. That should have been disclosed up front.

My friend and I want to prevent other people from getting hurt. Regulators need to think about legislation to protect consumers. Real estate fraud is on everyone's mind, because as usual the regulators did nothing during the fraud and are now dealing with issues of 5 years ago, just like the clean-up after the bubble bfore that, in tech stocks. Maybe just once they can get in front of a problem, instead of chasing it after it's snowballed.

The gold dealers tell me regulation is a bad idea, because it's punitive to small companies. But I think a simple disclosure form should be mandatory; gold dealers should disclose the market value of the coin they are claiming is worth two times what they are selling it for, and they should disclose their
commission. And there should be a place to report them so they can be put out of business for lying to elderly women, or anybody for that matter.

I found out today that gold dealers are not licensed. Is this true?

We need to get the word out - buyer beware!

I trust Franklin Sanders of The Money Changer.

Sincerely,

Schahrzad Berkland

I'm sure you all feel as bad for Schahrzad's friend as I do. Unfortunately, this kind of thing is common in the coin business, and has been for as long as I can remember. This is why, by the way, that you don't hear iTulip ranting about how gold is "real money" that somehow magically confers upon all who own, deal in, or trade it the qualities of honesty and good character. What nonesense. Just as many awful things have been done in the name of gold as any other money. In fact, gold market has a lot of catching up to do to become as safe and transparent as stocks or bonds.

This thread is about helping our readers keep from getting ripped off, by pointing out the do's and don'ts, and recommending dealers our community has learned to trust.

If they ain't on the iTulip list, don't buy from them! Don't buy anything from anyone calling you cold on the phone, and be on high alert from anyone calling form New York state.

I'll add to the list of good guys the one I've learned to trust over 10 years: Eric Carlson of Lexington Coin (781) 863-1500.

[DemonD]

Re: Avoid gold scammers

There are two gold ETF's that track the price of gold bullion: GLD and IAU. Both are sensible ways to hedge against hyperinflation and without the personal responsibility of holding physical gold.

[Spartacus]

Re: Avoid gold scammers

>> many based outside New York City

I'm unfamiliar with this usage - did you mean the more common "based out of"?

In other words, calling from NY city?

[grapejelly]

Re: Avoid gold scammers

There are two gold ETF's that track the price of gold bullion: GLD and IAU. Both are sensible ways to hedge against hyperinflation and without the personal responsibility of holding physical gold.

My opinion is that physical is very important and that these ETFs are more "paper". Diversify away from paper, is the idea here.

I suggest buying kruggerrands, philharmonics, mapleleafs, American Gold Eagles, and some physical silver in the form of generic rounds and 10oz bars. Avoid "proof" versions and anything along these lines that is said to have a premium of more than $5 to $15 per ounce of gold.

For fun, you might want to invest in some American double eagles or eagles from the 19th century. The St. Gaudens are pretty too but there is more of a chance for numismatic premium on the earlier versions. I wouldn't pay more than $20 - $50 per ounce over the POG for these although there are people who have done well collecting truly rare gold coins.

Anyway, I would never buy from someone calling me. There are some very good reputable dealers on the web that are a pleasure to deal with. I think that Colorado Gold, APMEX, CNI and Tulving are top notch, with the winner being APMEX overall for their fabulous website and decent prices and great customer service.

[WDCRob]

Re: Avoid gold scammers

How do call options figure into the physical vs paper conversation? Is there a risk that you'd be unable to exercise the option if things went truly haywire?

[grapejelly]

Re: Avoid gold scammers

How do call options figure into the physical vs paper conversation? Is there a risk that you'd be unable to exercise the option if things went truly haywire?

I don't know. But I do know that in the physical vs. paper conversation, either it's paper, or you have it in your physical possession.

Anything not in your possession is a paper claim, is it not? A liability of someone else.

There is only one thing that is not a claim on someone else and that is physical commodities in your possession.

If you think an EFT or bullionvault or an option is the same thing as having a physical commodity, you are ignoring the facts.

[metalman]

Re: Avoid gold scammers

agree on all the phone scammers. lot's of sleeze in the biz, unfortunately. agree also on the need for physical. buy bullion coins... eagles have a low premium, but are alloy. prefer .999 pure, such as philharmonics and canadian maples are good. i don't like krugerrands. yeh, they have the lowest premium but a lot were mined with apartheid labor... not for me. forget numismatics, that's collecting not hedging financial risk... a whole different ball game.

i like these guys, their web site shows up-to-date spot price, and buy/sell spreads.

http://www.scpm.com/goldsilverbullion.php

[DemonD]

Re: Avoid gold scammers

IMHO the only reason to hold physical commodities for a retail investor are the following:

1. You are a coin collector and are not planning on using it as currency.
2. You expect fiat currencies to go to zero.
3. You are an inventor and are using the physical commodity to invent/create some sort of electrical or computer device or are making jewelry.

My guess is that reason #2 is why everyone says hold the physical. I don't see it. I can see a revaluation of fiat currencies (to maybe 1/10th their current level), but at some point you have to redeem your currency for some good or service, or for some further investment. If you are going to redeem gold for further investment, I don't see any reason to hold physical when you can buy ETF's or mutual funds that are gold tracking or gold related. If you feel that in the future you are going to redeem gold for a good or service (let's say food, or having your roof repaired), then by all means, physical gold is a good choice.

A better choice, from what I understand, is silver. With gold you might buy a car, but with silver you can buy things like bread and milk.

To me, a situation where we are using gold and silver coins to pay for bread and cars is one that I cannot fathom at this point. I'm not saying I think the percentage of that happening is zero, just very, very unlikely.

[Spartacus]

Re: Avoid gold scammers

IMHO the only reason to hold physical commodities for a retail investor are the following:

The London exchange just defaulted on a base metal delivery couple of months ago. I'll bet that lots of companies (it had to be companies - the price of this commodity is too low, per kilo, for any "civilian" to have lots of it) that had stockpiles were able to negotiate much-higher-than "market" prices for their inventory.

So I'm not talking about paying for your bread with Silver coins, but about the ability of those who sold you paper to not pay a real price, or the maximum that you could get.

The Tokyo exchange has defaulted, apparently several times.

IMHO, the only way to get the highest possible price will be physical - shorts seem to have a lot of power on the exchanges, and can force you out of your position (force you to sell your futures contracts) prematurely.

I'm not fooling myself that I'll be able to call a top, but on the low-probability chance that I do, I don't want to have to settle for what the shorts want to pay.

BTW, My safety deposit box's price is a lot lower than mutual fund fees and futures transaction prices.

The exchanges can and will help the shorts - in Palladium one time, the COMEX demanded a payment greater than the value of the physical metal from the longs and helped relieve the shorts of their obligations.

So what are your options at that point - the COMEX will not allow you to take metal out of the COMEX warehouses, and the COMEX is demanding you pay more money than the metal is worth JUST TO MAINTAIN YOUR CURRENT number of contracts, and in exchange for paying more, there's no guarantee that if you do pay up, that you'll ever be able to get any metal. You hear rumors that companies off the exchange are paying 20% above COMEX prices - you have no metal to sell, only futures contracts that the metal users are not interested in - you can only sell to the shorts, who will buy back at a 20% discount.

They cannot force you out of your position if you own physical.

Remember the Hunts? That was basically a default - several books written about it afterwards claim that it was engineered by the shorts (who got the COMEX to change the rules against the Hunts, and the shorts, along with COMEX insiders, shorted even more aggressively just before the Hunts were pushed) and aided by the politicians.

If I remember the names of the books and their authors I'll post them. One was written by a guy who made several million in Silver on the Chicago board and got out a couple of months before the peak.

The Hunts never BEGAN their campaign as a market-cornering move. They became convinced in the early 70s that the US dollar would decline and they wanted to protect their money against that and against inflation. Later they became convinced that Silver was absolutely the best way to do that, and they ended up almost cornering the market, but the corner was not their primary intent to begin.

BTW - If they had taken physical delivery, like Buffet did, their corner would have worked - they could not have been forced out of the market by unfair COMEX rule changes (allowing COMEX insiders to short more, up to the day the Hunts were killed) or unfair government interference my means of threats of massive physical Silver sales.

[grapejelly]

Re: Avoid gold scammers

Every piece of paper is a liability of someone, one way or another. Ultimately there is a rise and fall of confidence in liabilities themselves, a sort of "counterparty credibility index". The only assets that are not liabilities of someone else are tangibles or paid-for real estate. Physical gold and silver are most important in times when doubt in counterparties is on the increase.

Like all things financial, you can't tell when there will be a huge drop in counterparty credibility. So you need to protect yourself by having physical possession of gold.

[rabot10]

Re: Avoid gold scammers

Anyone with an opinion of or experience with GoldMoney or the Perth Mint? :confused:

[grapejelly]

Re: Avoid gold scammers

Anyone with an opinion of or experience with GoldMoney or the Perth Mint? :confused:

The Perth Mint and the Central Fund of Canada have a long established reputation and are probably fair ways to buy "paper gold."

Goldmoney is not just a method of investing but a method of paying for things with gold. It is probably okay especially if you have a limited amount of money in it.

I am very uncomfortable with "paper gold." I think the time will come one day when investments in paper gold will be worth paper, while investments in real gold will be golden.

I think if you don't hold it, you don't own it, in a fundamental sense. Nothing wrong with paper, but you are mistaken if you feel that paper is a substitute for holding the real thing.

[jk]

Re: Avoid gold scammers

the perth mint allows for segregated holdings of numbered bars [for a maintenance fee]. i, too, would like to know whether anyone on the board has personal knowledge and/or experience with perth mint, goldmoney or bullionbank. [not theory and not hearsay. knowldege and/or experience.]

[Finster]

Re: Avoid gold scammers

The Perth Mint and the Central Fund of Canada have a long established reputation and are probably fair ways to buy "paper gold."

Goldmoney is not just a method of investing but a method of paying for things with gold. It is probably okay especially if you have a limited amount of money in it.

I am very uncomfortable with "paper gold." I think the time will come one day when investments in paper gold will be worth paper, while investments in real gold will be golden.

I think if you don't hold it, you don't own it, in a fundamental sense. Nothing wrong with paper, but you are mistaken if you feel that paper is a substitute for holding the real thing.

Agreed, GJ. I like CEF (Central Fund of Canada) and have a lot of confidence in it, but nothing is a complete substitute for actual bullion in your physical possession. I just look at physical bullion and "paper" as being for different purposes. You just don't have to choose one or the other in an either-or exclusive proposition. The physical is the ultimate, if-everything-goes-to-you-know-where, security. But adjusting your position as circumstances warrant can be cumbersome, so that's where having something more easily traded comes in.

Physical bullion for security. For position tweaking and trading, there's pool accounts offered by dealers such as Kitco, Fidelitrade, and Monex, Perth Mint certs, Central Fund shares, and the open-end ETFs.

[L.Salvaggio]

Re: Avoid gold scammers

I don't know. But I do know that in the physical vs. paper conversation, either it's paper, or you have it in your physical possession.

Anything not in your possession is a paper claim, is it not? A liability of someone else.

There is only one thing that is not a claim on someone else and that is physical commodities in your possession.

If you think an EFT or bullionvault or an option is the same thing as having a physical commodity, you are ignoring the facts.

My experience with the ETF - GLD is that it is easily manipulated and is a wall street paper trade .

I do how ever have been forced to lighten up my deposit box it was getting too heavy , so I look into Bullion Vault ( Not Bullion Bank )
I ask a gold news letter writer his opinion , he said to hold off till he emailed some people in the business , His reply was they seem to be who they say they are no complaints from their (bullion Vault ) clients .
The only draw back is their security rule of once you use your bank account it becomes the only account they will recognize to send your money back to you when you sell ( you can have the gold sent back but that's not practical and you are defeating the purpose of having gold over sea's .

In a emergency you want the cash from the gold sale sent home to your bank , for you to use to keep up your standard of living or to have cash when things get cheap enough to invest in or to buy a house . With out drawing attention to ones self .

I have spoken to Bullion Vault several times on the phone and through emails , they seem to be who they say and I think enough of them to have them hold half of my Bullion . The security sign up and your home Bank account are all done over their secure web site , your Gold is allocated to you and you alone and is free of any liability you receive a public username which you can check you Gold any time against the BRINKS daily Audit with out logging on to the website. You can also check your Good Gold Brinks audit when your logged in to your account .

You have a choice of which Vault to hold the gold at , USA , London or Zurich most customers hold their Gold in ZURICH , also you chose your currency , the U.S. Dollar , The EURO or THE BRITISH Pound all gold held is good gold delivered .

Read what they have to offer they are not a Bullion Bank or paper holders they guarantee it and So does BRINKS who is the security and insurer of the Gold Bullion .

I hope this helps out on were to hold your gold like I said half of mine is in Zurich and half is home in my deposit box .
You never know when the U.S. Treasury my want your gold , you may have to hide it or not get to it for a long time , in this way Bullion Vault sells it for you and wires the money to your bank account .
I had to use my savings to send money to the vault ,then at the right time buy the gold in Zurich then sell my gold at home to replenish my Savings . This process has taken about 6 months ..... I never lost my gold position or money only paid $25.00 per bank wires ..
Regards
L. Salvaggio